Large national budget deficits do not cause large trade deficits. If

Question

Large national budget deficits do not cause large trade deficits. If they did, countries with the largest budget deficits would also have the largest trade deficits. In fact, when deficit figures are adjusted so that different countries are reliably comparable to each other, there is no such correlation.

If the statements above are all true, which of the following can properly be inferred on the basis of them?

(A) Countries with large national budget deficits tend to restrict foreign trade.

(B) Reliable comparisons of the deficit figures of one country with those of another are impossible.

(C) Reducing a country’s national budget deficit will not necessarily result in a lowering of any trade deficit that country may have.

(D) When countries are ordered from largest to smallest in terms of population, the smallest countries generally have the smallest budget and trade deficits.

(E) Countries with the largest trade deficits never have similarly large national budget deficits.

KarishmaB · Accepted Answer

The argument tells us that budget deficit is not correlated with trade deficit. Does this imply that countries with large trade deficit can never have large budget deficit? If you say that, you are saying that the two deficits are correlated in some way. The point is that they are not related so if one is large, the other could be small or large. A country with a large budget deficit may have a small or a large trade deficit - apparently, the trade deficit depends on factors other than budget deficit. Hence we cannot say that the country with a large budget deficit can not have a large trade deficit. 
As for the extreme words, you cannot ignore an option just because it has an extreme word in it. Usually, "every", "all", "never" etc rarely work in real life and hence our conclusions will usually not have such words but an argument could be easily worded such that an extreme word appears in the correct answer.

The correct answer here would be (C)
(C) Reducing a country’s national budget deficit will not necessarily result in a lowering of any trade deficit that country may have.
The argument tells us that the two deficits are not correlated so reducing one will not necessarily result in lowering of the other. The other may or may not reduce depending on other factors.

nusmavrik · Answer

Premise : there is no such correlation between budget deficit and trade deficit

So we can infer that reducing budget deficit will NOT necessarily reduce the trade deficit.
C is correct.

(A) Countries with large national budget deficits tend to restrict foreign trade. >> Foreign trade is Out of scope
(B) Reliable comparisons of the deficit figures of one country with those of another are impossible. >> Impossible here is wrong. It cannot be inferred from this passage.
(C) Reducing a country’s national budget deficit will not necessarily result in a lowering of any trade deficit that country may have. Answer
(D) When countries are ordered from largest to smallest in terms of population, the smallest countries generally have the smallest budget and trade deficits. >> The size of the country has no bearing on the argument. Irrelevant
(E) Countries with the largest trade deficits never have similarly large national budget deficits. >> Never is wrong. This cannot be inferred.

PrincetonMBA2007 · Answer

Restate the premise "large national deficits may not necessarily result in large trade deficits. there is no correlation between national deficits and trade deficits"

A) Out of scope. The premise is about national deficits and trade deficits. it has nothing about trade restriction
B) False. The premise is about the correlation between national deficits and trade deficits. It has no information about comparison between deficits of different countries. In addition, the word impossible is too strong. There are no facts support such comparison is impossible. 
C) Correct answer. The premise states that there is no correlation between national and trade deficits. Therefore, reducing one may or may not lead to the reduction of another. 
D) The premise says nothing about population. Rule out
E) Exact opposite. The premise says there is no correlation between trade deficits and national deficits

gsothee · Answer

Premise: When deficit figures are adjusted so that the countries can be reliably compared , no correlation is found between budget deficit and trade deficit.

Conclusion:-Large Budget deficit does not mean large trade deficit.
 
(A) Countries with large national budget deficits tend to restrict foreign trade.   Not relevant to argument. 
(B) Reliable comparisons of the deficit figures of one country with those of another are  impossible .
 Argument itself closes the loophole by including "when adjusted", therefore it is irrelevant whether comparison can be made or not. Further impossible introduces extreme inference. 
(C) Reducing a country’s national budget deficit will not necessarily result in a lowering of any trade deficit that country may have.
 Correct, since there is no correlation between BD & TD , it is safe to infer that reducing BD may not lead to lowering of TD. 
(D)  When countries are ordered from largest to smallest in terms of population, the smallest countries generally have the smallest budget and trade deficits. 
 New information , argument does not refer to population sizes. 
(E) Countries with the largest trade deficits  never  have similarly large national budget deficits.
 "Never" exaggerates the inference, no relationship between BD & TD doesn't mean BD &TD cannot occur together. 
 
IMO C.

whamberto · Answer

I chose C for this question:

A. This answer may or may not be true - there is not enough information within the stimulus to say that this answer is true.

B. This answer choice directly counters a statement within the stimulus. The stimulus says "when deficit figures are adjusted so that different countries are reliably comparable to each other..."

C. This is a good inference. The reason is because it essentially restates that large national budget deficits and large trade deficits have no correlation.

D. We are not concerned with ordering countries from largest to smallest population - this answer choice is irrelevant. Also, the smallest countries may or may not have the smallest budget and trade deficits - there is nothing within the stimulus to suggest this answer.

E. Firstly, the word "never have" is very strong - I was a bit suspicious of this. Also, I knew that this wasn't true because there is actually no correlation between large national budget deficits and large trade deficits as stated in the last sentence. Therefore, this answer choice can't be correct.

Alexisvargas10 · Answer

Please, help with this question:
Large national budget deficits do not cause large trade deficits. If they did, countries with the largest budget deficits would also have the largest trade deficits. In fact, when deficit figures are adjusted so that different countries are reliably comparable to each other, there is no such correlation.
If the statements above are all true, which of the following can properly be inferred on the basis of them?

(A) Countries with large national budget deficits tend to restrict foreign trade.
(B) Reliable comparisons of the deficit figures of one country with those of another are impossible.
(C) Reducing a country’s national budget deficit will not necessarily result in a lowering of any trade deficit that country may have.
(D) When countries are ordered from largest to smallest in terms of population, the smallest countries generally have the smallest budget and trade deficits.
(E) Countries with the largest trade deficits never have similarly large national budget deficits.

Anlysis:

I chose E based on the statements, I do not have a reason to think of it as a wring answer, it might be the extreme word "NEVER" but I do not see any reason further. Could someone help me please?

thank you,

Alexis

mneeti · Answer

Can any expert please help explain the difference in meaning between 2nd line of the passage and answer choice (B)?

pqhai · Answer

Hello mneeti.

The 2nd line of the stimulus says: when deficit figures are adjusted so that different countries are reliably comparable to each other, there is  no such correlation.

It means when deficit figures are adjusted to a comparable levels --> there is  NO correlation "countries with the largest budget deficits would also have the largest trade deficits".

Do not be confused the term "such correlation".

Option B, however, says the deficit figures of one country with those of another can't be compared. That's wrong. They are different, but can be adjusted to a comparable levels.

Hope it helps.

rishabhmishra · Answer

sir can you please help me to understand the argument

GMATNinja · Answer

According to the author, "large national budget deficits do not cause large trade deficits." The rest of the passage supports this claim:

If large national budget deficits DID cause large trade deficits, then "countries with the largest budget deficits would also have the largest trade deficits." 
 However, when countries are reliably compared (by adjusting deficit figures), "there is no such correlation."

Thus, the evidence suggests that TRADE deficits do not necessary go up as BUDGET deficits go up. This, in turn, suggests that trade deficits would not necessarily go DOWN as BUDGET deficits go down. So we need an answer choice that fits with these inferences.

See if that helps!

CAMANISHPARMAR · Answer

If you negate (C) that is  "Reducing a country’s national budget deficit will   not   necessarily result in a lowering of any trade deficit that country may have"  CONTRADICTS the first statement "Large national budget deficits do not cause large trade deficits". This results in establishing the "cause and effect relationship". Hence option C is correctly reproducing the claim in question stem that there is not causation between budgets deficits and trade deficits.

zac123 · Answer

Large national budget deficits do not cause large trade deficits. If they did, countries with the largest budget deficits would also have the largest trade deficits. In fact, when deficit figures are adjusted so that different countries are reliably comparable to each other, there is no such correlation.

If the statements above are all true, which of the following can properly be inferred on the basis of them?

(A) Countries with large national budget deficits tend to restrict foreign trade.

(B) Reliable comparisons of the deficit figures of one country with those of another are impossible.

(C) Reducing a country’s national budget deficit will not necessarily result in a lowering of any trade deficit that country may have.

(D) When countries are ordered from largest to smallest in terms of population, the smallest countries generally have the smallest budget and trade deficits.

(E) Countries with the largest trade deficits never have similarly large national budget deficits.

C is the best ans . Rest all seem extreme

PrashantK0099 · Answer

(C) Reducing a country’s national budget deficit will not necessarily result in a lowering of any trade deficit that country may have.
Correct

CEdward · Answer

Large national budget deficits do not cause large trade deficits. If they did, countries with the largest budget deficits would also have the largest trade deficits. In fact, when deficit figures are adjusted so that different countries are reliably comparable to each other, there is no such correlation.

If the statements above are all true, which of the following can properly be inferred on the basis of them?

(A) Countries with large national budget deficits  tend to restrict foreign trade. 
The passage states that no large trade deficits are caused when there is a large budget deficit...that should not be taken to imply such countries restrict trade.

(B) Reliable comparisons of the deficit figures of one country with those of another  are impossible. 
The passage says otherwise.

(C) Reducing a country’s national budget deficit will not necessarily result in a lowering of any trade deficit that country may have.
Correct. Budget deficit is not correlated with trade deficit so its not reasonable to expect that changing one will affect the other.

(D) When countries are ordered from largest to smallest in terms of population, the smallest countries generally have the smallest budget and trade deficits.
There's no clear indication about how the size of the country is related to budget and trade deficits. e.g. a small country could certainly have a very large budget and trade deficit

(E) Countries with the largest trade deficits  never  have similarly large national budget deficits.
Budget deficits and trade deficits are not correlated but that doesn't mean a country can't have both of these large deficits.

S1ny1s · Answer

if there are no relations between them meaning
if the budget deficit ( when the government spends more than income from taxes, fees, and investments) is lower doesn't necessarily the trade deficit(the country is buying more than selling) can be lower. it can be higher) that is the reason (C) is the exact answer.

when it comes to option choices(E)
 In the argument, national budget deficits do not cause large trade deficits. that means there are other factors to cause trade deficits( such as-
 a country lacks the efficient capacity to produce its own products, lacks skill and manpower, and lacks of sources and resources in the country)
 that doesn't mean higher trade deficits have larger or lower national budget deficits. it could be but we don't infer from this argument. We have to stick to the 
 information given in the argument. not thinking outside of the box.

skmaan · Answer

Hi,

Between B & C :
(B) Reliable comparisons of the deficit figures of one country with those of another are impossible.
- The passage mentions comparison of adjusted deficit figures > Implying deficit figures are not comparable reliably 'without adjustment' >> Why does it not come under 'impossible' if it gives a condition (Is it not a necessary condition?)) 
 
(C) Reducing a country’s national budget deficit will not necessarily result in a lowering of any trade deficit that country may have.

Follow Up>> How to go by selecting best of two shortlisted options?, eg in above I was fine with C & B both but selected B as I figured para talks about a necessary condition

GMATNinja · Answer

The argument says that when deficit figures are adjusted so that different countries are reliably comparable to each other, there is no correlation between countries having the largest budget deficits and countries having the largest trade deficits.

(B) doesn't say that reliable comparisons of deficit figures of one country with those of another are impossible  without adjustment . If it did, then (B) might become a more inviting answer choice. Instead, it simply says that reliable deficit comparisons across countries are impossible, period. In contrast, the argument tells us that those comparisons  are  possible, though with the provision that making the comparisons reliably does require adjustment.

What is that adjustment? We don't know. Perhaps we have to adjust by converting all numbers into a single equivalent currency so that we can properly compare them. Perhaps different countries release budget and trade deficit numbers at different times of the year, and some adjustment has to be undertaken to ensure that the differing timing is accounted for and doesn't improperly skew the comparison. Perhaps we need to control for inflation or some additional country-specific factor(s).

Again, we don't know what adjustment needs to be made, but we also don't need to know. The argument tells us that the adjustment  is possible , which means that the reliable comparison is also possible. Hence, we discard (B) and stick with (C).

I hope this helps!

abc3107cba · Answer

i didn't get the passage can you please explain it to me

GMATQuizMaster · Answer

Here is a clear breakdown of what this passage is saying:  
 
  The passage challenges a common assumption about economic relationships.   
   The Claim : The author states that large national budget deficits (when a government spends more than it takes in)  do not cause  large trade deficits (when a country imports more than it exports).   
   The Test : The author explains that if this causal relationship were true, we should see a clear pattern - countries that overspend the most should also be the biggest net importers. It's like saying "if eating ice cream causes weight gain, then people who eat the most ice cream should be the heaviest.  
   The Evidence : When economists properly adjust the numbers to make fair comparisons between different countries, they find no such pattern exists.    
 
 Real-world example:

Country A has a huge budget deficit while Country B has a large trade deficit, but these are completely unrelated.

Country A might actually export more than it imports, and Country B might have a balanced budget.  
  The key insight is that just because two things might seem related doesn't mean one causes the other.

Large national budget deficits do not cause large trade deficits. If

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